Month: February 2018

It’s Getting Lowly At The Top

Via Dana Lyons’ Tumblr,

The number of stocks hitting new lows just saw a huge spike, especially considering the major indexes remain within arm’s length of their 52-week high.

As we mentioned yesterday, the drop in stocks to begin the week has really shaken things up in the market. It’s not that the decline has been that large. Rather, the relentless rally of late had conditioned investors in a way such that the moderate losses of the past 2 days served as a bit of a shock. And from the potential over-reaction by volatility traders to the profusion of both new highs and new lows on the NYSE on Monday, we are seeing some interesting developments in response. Yesterday brought another odd development among the new highs/new lows on the NYSE as we note in today’s Chart Of The Day.

To wit: yesterday’s drop in the S&P 500 (SPX) still left the index just 1.76% away from its 52-week (and all-time) high. Despite that, we saw 271 stocks on the NYSE closed at a 52-week low versus just 44 new highs. The net difference of 227 more new lows than new highs represented 7.4% of all stocks traded on the NYSE. If you think that sounds like a lot, you’re right.

Since 1970, the S&P 500 has closed within 2% of its 52-week high on more than 4500 days. This is just the 15th time on such days that the number of net new lows totaled more than 7% of all stocks trading on the NYSE. Loosening the parameters a little to include all days within 3% of a SPX 52-week high, the chart below shows that yesterday was just the 30th time that NYSE net new lows represented more than 7% of all issues traded.

image

 

Glancing at the chart, it’s apparent that several of the previous 14 occurrences came at rather inauspicious times, including near cyclical tops in 1972, 2000 and 2007.

However, there were also times in the past half decade that didn’t inflict much if any damage on the market. So is this “lowly” condition really something to worry about?

*  *  *

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Frontrunning: February 1

  • Republican memo likely to be released Thursday -Trump administration official (Reuters)
  • Ex-Trump Aide Page Was on U.S. Counterintelligence Radar for Years (WSJ)
  • FBI Knew of Clinton Emails Weeks Before Alerting Congress (WSJ)
  • Facebook Reversal Lifts Markets, Though FAANG Jitters Linger (BBG)
  • How trade disputes could hurt U.S. pork exports (Reuters)
  • Dollar weakens after Fed bounce proves short-lived (Reuters)
  • Bitcoin skids to lowest since November after worst month in three years (Reuters)
  • Worries Grow That the Price of Bitcoin Is Being Propped Up (NYT)
  • How GE Went From American Icon to Astonishing Mess (BBG)
  • Deluge of Influenza Patients Forces Hospitals to Creatively Cope (WSJ)
  • A $1.5 Trillion Question in Trump’s Public Works Plan: Who Pays?  (BBG)
  • Insurers gingerly test bitcoin business with heist policies (Reuters)
  • Bored With Banking, This Former Citi Trader Went Full Crypto (BBG)
  • U.S. says military option not believed to be close for solving North Korea crisis (Reuters)
  • How J.D. Power Was Acquired by a Chinese Company Shrouded in Mystery (WSJ)
  • A Bitcoin Conference Rented a Miami Strip Club—And Regretted It (BBG)
  • Capitec Report: Was There Insider Trading? (Huffpost)

Overnight Media Digest

WSJ

– UK Prime Minister Theresa May arrived in Beijing on Wednesday to beat the drum for deepening trade ties and showcase her country’s global ambitions, a visit clouded by simmering discord at home over her handling of Brexit negotiations. on.wsj.com/2no6mvJ

– Pandora Media Inc will lay off 5 percent of its workforce as the internet radio company tries to rein in costs while investing in advertising technology and efforts to woo back listeners. on.wsj.com/2nqrxgK

– German media giant Bertelsmann SE on Wednesday announced it is seeking to unload one of its largest businesses which has struggled to grow in a full or partial sale. on.wsj.com/2nqiPyK

– The FBI publicly urged U.S. President Donald Trump not to release a classified memo, escalating a simmering dispute over Republican allegations of improper surveillance in the probe examining whether Russia interfered in the 2016 election. on.wsj.com/2nnHSTq

– Qualcomm Inc said Wednesday that it had reached a multiyear deal with Samsung Electronics Co Ltd that covers various areas including mobile devices. on.wsj.com/2npLe8i

– Federal Reserve Chairwoman Janet Yellen concluded her final policy meeting Wednesday by holding interest rates steady and leaving it to her successor to decide whether to lift them more quickly to prevent the economy from overheating. on.wsj.com/2nriYSH

 

FT

– European Union banks will face the toughest “stress test” of their ability to withstand theoretical shocks this year, including the impact of Britain’s exit from the bloc, the EU’s banking watchdog said on Wednesday.

– Brenda Fitzgerald, head of the leading U.S. public health agency, has resigned because of financial conflicts of interest that documents showed included purchases of tobacco and healthcare stocks while in office.

– Britain’s government said on Wednesday it would hand over to parliament a leaked report that suggested Brexit would hurt the economy, trying to deflect accusations that ministers are badly prepared for leaving the European Union.

 

NYT

– Uber Technologies Inc will let certain users in San Francisco reserve pedal-assist electric bicycles through its app, with the idea that people will see the bicycles as a cheaper and faster alternative. (nyti.ms/2DRbkr7)

– Xerox Corp on Wednesday said that it would combine operations with Fujifilm Holdings Corp of Japan. Under the deal, Fujifilm will own just over 50 percent of the Xerox business and Xerox will become part of an existing Fuji Xerox joint venture. (nyti.ms/2DRcNxD)

– The U.S. Environmental Protection Agency Administrator Scott Pruitt on Wednesday filed the legal documents required to suspend the 2015 Waters of the United States rule for two years, while it works to repeal and replace the Obama-era clean water regulation. (nyti.ms/2E1Sv7Y)

– German carmakers BMW and Daimler AG on Wednesday said that they had taken action against executives involved in an organization that sponsored emissions experiments on monkeys, as the companies tried to squelch a public outcry that threatens to tarnish the image of Germany’s most important exports. (nyti.ms/2nuVI5y)

 

Canada

THE GLOBE AND MAIL

** A labour arbitrator has overturned the firing of a Canadian Pacific Railway Ltd conductor involved in the collision of two trains in midtown Toronto in 2016, saying the man’s culpability was mitigated by the company’s failure to provide adequate experience. tgam.ca/2BJdcQD

** Statistics Canada reported that the country’s November real gross domestic product grew 0.4 percent month over month, the biggest one-month rise since May. tgam.ca/2BIG3ER

NATIONAL POST
** Boeing Co’s chief executive Dennis Muilenburg said the company is continuing discussions about a potential tie-up with Embraer SA, a deal some analysts say is more likely after a top U.S. trade body unexpectedly voted against the American aerospace company last week. bit.ly/2BIXm8w

** Aleksandr Abramov, non-executive chairman of Evraz Plc and Aleksandr Frolov, its CEO, are among people named in a list of wealthy Russians close to the Kremlin published by the United States. bit.ly/2BHmhtb

 

Britain

 

 

 

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FISA Memo Likely To Be Released Thursday: Administration Official

Republicans are reportedly planning to kick off the month of February by releasing the infamous FISA memo alleging “egregious abuses” of FISA surveillance powers by the FBI, Reuters reported citing a Trump administration official who said on Wednesday that the memo is “likely to be released on Thursday.”

The four-page memo has circulated among the House, and has been seen by the president and his chief of staff, John Kelly. Trump has until Friday to decide whether the memo should remain classified.

The news comes after the FBI yesterday issued a “rare public statement” condemning the memo as factually inaccurate, saying it had “grave concerns” about its release, which it said could be detrimental to national security.


FBI Director Christopher Wray

Even Democrats, who initially said the memo was intended to challenge the Mueller probe are now admitting that its contents could be damning, and raise questions about the bureau’s decision to wiretap Trump campaign aide Carter Page – evidence that was used to help justify the launch of the Trump investigation. Adam Schiff, the top Dem on the House Intel Committee, reportedly said yesterday that it could lead the firings of Deputy AG Rod Rosenstein and Special Counsel Mueller.

Earlier this week, Deputy FBI Director Andrew McCabe announced his resignation, reportedly under pressure, as reports of an internal probe leaked. McCabe, along with Former FBI Director James Comey and Rosenstein are all reportedly named in the report.

Trump previously said this week that he was “100%” going to release the memo following a question from a Republican lawmaker following the State of the Union.

According to lawmakers who have reviewed the memo, it contains a discussion about the infamous dossier that was put together about then candidate Donald Trump by a British spy. Most of the claims in the scandalous dossier have not been verified. Most involve alleged ties to Russian entities.

As we reported earlier, the White House is still pondering whether to release the memo’s supporting documents along with the memo.

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Cryptos Tumble After India Says It Will “Take All Measures To Eliminate” Their Use

India’s government became the latest country to declare its opposition to bitcoin payments, saying it would do everything in its power to eliminate the use of cryptocurrencies.

“The government does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system,” Finance Minister Arun Jaitley told lawmakers in New Delhi on Thursday. However, while blasting bitcoin, the Indian finmin announced that India would embrace blockchain “The government will explore use of blockchain technology proactively for ushering in digital economy.”

The news sent the crypto space sliding, with Bitcoin now well below its recent support level around $10,000. Curiously, Ethereum has been largely spared the recent rout, and remains up +30% YTD, while Bitcoin is down -30% in 2018.

Since reaching a peak of almost $20,000 in early December after the introduction of futures contracts on regulated exchanges in the U.S., a series of negative news has buffeted Bitcoin and rival cryptocurrencies, with losses intensifying since the start of 2018. Bitcoin’s January slide knocked $44.2 billion off the $200 billion in market value generated in all of 2017, the biggest one-month loss in dollar terms in the short history of digital assets according to Bloomberg.

Bitcoin

Having failed previously in the “control” of capital outflows via gold, the Indian government – following a Reserve Bank of India advisory – last month raided one bitcoin seller and issued a warning cautioning citizens against acquiring and trading virtual currencies. The scrutiny led to several exchanges in India to suspend operations amid fears they could violate anti-money laundering and financial terrorism laws. Indeed, as Bloomberg reports, India’s income tax officials started investigating the exchanges for potential violations shortly after issuing the warning.

The federal government had also set up a panel to decide on India’s stand on virtual currencies, people with knowledge of the matter said on Dec. 12.

The employees and owners of the country’s crypto exchanges are, understandably, nervous.

“After today’s announcement, people are getting scared,” said Anshul Vashist, Delhi-based support manager at the cryptocurrency exchange Coinsecure. “We have seen some dumping of bitcoins.” Coinsecure has a volume of about 100 coins a day, he said.

The announcement is the latest disappointing news to hit the price of bitcoin – which has dropped more than 50% in a little over a month – during one of the pioneering cryptocurrency’s worst weeks in recent memory. It’s latest leg lower began following reports that the CFTC subpoenaed Bitfinex – believed to be the world’s most active bitcoin exchange – and Tether – a separate company that’s run by the same people, stoking suspicions that the exchange could be hiding missing funds used to back a popular dollar-backed cryptocurrency called tether. On the other hand, concerns that South Korea – one of the world’s biggest crypto markets – would shut down bitcoin trading were put to rest after the nation yesterday said it had no plans to pursue such a strategy, news of which catalyzed the first sharp move lower in cryptos.

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Schiff Accuses Nunes Of “Secretly Altering” FISA Memo Before White House Review

House Intel Committee Chairman Devin Nunes “secretly altered” the four-page FISA memo before sending it off to the White House for review, according to ranking Democrat Adam Schiff.

 

 

Schiff detailed the changes in a two page letter issued late Wednesday, calling Nunes “deliberately misleading” and demanded that the Committee hold a new vote next Monday to release the modified memo to the public. In Schiff’s letter, it is noted that “material changes” were made to the original four-page memo that members of the House have been able to view since January 18. 

This evening the Committee Minority discovered that the classified memorandum shared by the Committee Majority with the White House is not, in fact, the same document that Members of the House of Representatives have been reviewing since January 18, 2018 and that the Committee Majority voted on Monday to release to the public, over objections from the Department of Justice and the Federal Bureau of Investigation.

Upon our discovery that the document sent for public review had been secretly altered, the Majority belatedly afforded the Minority an opportunity this evening to compare the document transmitted on Monday night by the Majority to the White House with the document made available to all House Members since January 18. After reviewing both versions, it is clear that the Majority made material changes to the version it sent to the White House, which Committee Members were never apprised of, never had the opportunity to review, and never approved. 

This is deeply troubling, because it means that the Committee Majority transmitted to the White House an altered version of its classified document that is materially different than the version on which the Committee voted. The White House has therefore been reviewing a document since Monday night that the Committee never approved for public release. 

Schiff then goes on to say “it is now imperative that the Committee Majority immediately withdraw the document that it sent to the White House,” adding “it must hold a new vote to release to the public its modified document,” suggesting a vote could take place as early as Next Monday, February 5. 

In response to Schiff’s letter, Senate Minority Leader Chuck Schumer called on Paul Ryan to “put an end to this charade” (exposing criminal FBI and DOJ conduct). 

House Intel GOP Responded to Schiff’s allegations, and Byron York of the Washington Examiner spoke with House Intel sources who said that the “material changes” consisted of grammatical fixes, a change requested by the FBI to protect methods and sources, and a change requested by Democrats for accuracy.

The “FISA memo” has been the subject of intense controversy since its existence was made known in mid-January – with GOP House members calling it an “explosive” and “shocking” document which needs to be immediately released to the public. 

One congressman even likened the report’s details to KGB activity in Russia. “It is so alarming the American people have to see this,” Ohio Rep. Jim Jordan told Fox News. “It’s troubling. It is shocking,” North Carolina Rep. Mark Meadows said. “Part of me wishes that I didn’t read it because I don’t want to believe that those kinds of things could be happening in this country that I call home and love so much.”

Rep. Peter King, R-N.Y., offered the motion on Thursday to make the Republican majority-authored report available to the members.

“The document shows a troubling course of conduct and we need to make the document available, so the public can see it,” said a senior government official, who spoke on condition of anonymity due to the sensitivity of the document. “Once the public sees it, we can hold the people involved accountable in a number of ways.” –Sara Carter

Meanwhile, the FBI is livid – issuing a Wednesday statement pointing to “grave concerns about material omissions of fact that fundamentally impact the memo’s accuracy”

Furthermore, FBI Director Christopher Wray told the White House that he opposes the memo’s rlease, as it “contains inaccurate information and paints a false narrative,” according to Bloomberg. 

Nunes hit back against the claims, issuing two statements via the House Intel Committee website: 

“Having stonewalled Congress’ demands for information for nearly a year, it’s no surprise to see the FBI and DOJ issue spurious objections to allowing the American people to see information related to surveillance abuses at these agencies. The FBI is intimately familiar with ‘material omissions’ with respect to their presentations to both Congress and the courts, and they are welcome to make public, to the greatest extent possible, all the information they have on these abuses. Regardless, it’s clear that top officials used unverified information in a court document to fuel a counter-intelligence investigation during an American political campaign. Once the truth gets out, we can begin taking steps to ensure our intelligence agencies and courts are never misused like this again.”

 

 

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Welcome To The Post-Yellen Era: Futures Flat, Yields Blow Out, Dollar Stumbles

Welcome to the post-Janet Yellen era (which technically ends on Saturday, with Jay Powell sworn in on Monday) which sees the month of February begin with solid risk appetite as S&P futures initially rallied out of the gate only to fade into the European session, despite strong performance in Europe and Asia as the MSCI Asia Pacific index rose for first time in four days, as TSY yields spiked to 2.75%, aka the ‘red zone.’

MSCI’s all-country equity index rose around 0.2 percent after Tokyo bounced 1.7 percent off four-week lows. European bourses opened around 0.3 percent firmer MSCI’s emerging Asian index closed 0.3 percent lower however. At publication time, European stocks were green with the E-mini up 0.1%…

… although it will be the 10Y US Treasury and the US Dollar that traders will be more focused on as was the case in most of January, with global shares bouncing after recent end-Jan profit-taking but rising US yields pose a threat as 10Y TSY yields jump to 2.74%, highest since 2014.

Indeed, equity bullishness is being tempered by rising global bond yields. The Fed held interest rates unchanged on Wednesday but raised its inflation outlook, no longer saying it expected price growth to stay below 2 percent. It also flagged “further gradual” rate increases.

Treasuries pulled lower in early trade as red and green Eurodollars push through post-FOMC lows; 10-year yield edges up four basis points to 2.75%.   Two-year U.S. yields are approaching decade-highs and could rise further should jobs data due on Friday confirm sustained labor market strength.

The selloff continues across the globe, with the Aussie curve bull steepening for a second day; JGB futures marginally lower after 10-year auction. The 10y German Bund yield was also shaken, jumping above 0.7% to highest level since 2015.

Meanwhile, dollar bulls were faced with another day of disappointment as London trading saw a sharp reversal of the greenback’s fortunes, with the Bloomberg spot index quickly erasing early gains, although it has since posted a modest rebound.

The weak dollar trend will not be changed by Fed rate rises, ING Bank analysts predicted. Not only was policy tightening already priced in, economic recovery elsewhere and U.S. political uncertainty suggested “the overnight dollar strength is unlikely to transform into a trend,” they told clients.

Higher Treasury yields offered little support for the dollar as the perplexing divergence between rates and the U.S. currency remains. The euro and the pound were among the main beneficiaries as real money names kept adding longs. European equities traded in a sea of green with bonds edging lower and commodities trading mixed

This week’s meeting of the U.S. Federal Reserve was more hawkish than expected, but confirmed what markets had already expected – an interest rate rise in March, said Markus Huber, a trader at brokerage City of London Markets.

“In light of today’s flood of earnings in Europe and the United States, the Fed meeting will most likely have only a limited and temporary impact on markets,” Huber predicted.

Amid a flurry of company results the Stoxx Europe 600 Index headed for the first advance in four days, led by finance and technology shares. The FTSE 100 (+0.2%) lagged its peers with GBP/USD back above 1.4250. In terms of sector specifics, all sectors trade higher with the exception of health care names in the wake of Novo Nordisk (-4.5%) latest earnings update; outperformance seen in utilities, IT and financials as earnings dictate the state of play. Notable large cap earnings this morning include, BBVA (+1.1%), Roche (+0.3%), Unilever (flat), Vodafone (-0.8%), Daimler (-0.8%) and Shell (-0.7%).

The MSCI Asia Pacific Index also rose, with a surge in Japanese stocks offsetting declines in China and India. Australia’s ASX 200 (+0.9%) and Nikkei 225 (+1.5%) traded higher with the rebound in crude fuelling outperformance in Australia’s energy sector, while Japan led the gains in the region amid a softer JPY and deluge of corporate earnings. Conversely, Shanghai Comp. (-1.0%) and Hang Seng (-0.3%) were less inspiring and traded choppy after a 6th consecutive open market operation skip by the PBoC (draining 80bn yuan) and an inline Chinese Caixin Manufacturing PMI release, while a slump in Shenzhen stocks to 6-month lows also triggered further mainland pressure. e. Finally, 10yr JGBs were lower amid the positive risk tone in Japan, although prices were supported off lows after stronger demand in the 10yr JGB auction.

Global equity markets are torn between buoyant economic growth and double-digit company earnings, on the one hand, and the possibility that U.S. and euro zone central banks will tighten policy faster than expected. The growth momentum was confirmed by manufacturing activity surveys on Thursday that showed Asian factories getting off to a strong 2018 start and Europe posting solid growth.

Boeing and Facebook were the latest to reinforce the solid U.S. earnings growth picture. European markets cheered improved performance at Unilever and Royal Dutch Shell. Huber said results from the likes of Amazon and Apple would be crucial. “It will be essential that those companies not only deliver in regard to earnings expectations but also show that the momentum going forward remains strong,” he added.

WTI and Brent crude futures are seen higher alongside the softer USD with prices above USD 65/bbl and USD 69/bbl respectively; prices could also be being supported by comments from Shell who expect their 2018 CAPEX to be at the lower end of their guided range. Notable energy newsflow includes Goldman Sachs raising their Brent crude oil 3-month forecast to USD 75/bbl and 6-month forecast to USD 82.50/bbl as “rebalancing has likely been achieved”. In metals markets, spot gold trades lower amid the broader global risk sentiment and thus unable to benefit from the softer USD. Elsewhere, Chinese steel futures were seen higher overnight amid speculation over an extension to existing output curbs. Finally, Glencore, as part of their production update this morning, announced that copper output should rise to nearly 1.5mln/tonnes this year as production at their Katanga mine ramps up

Market Snapshot

  • S&P 500 futures up 0.2% to 2,830.30
  • STOXX Europe 600 up 0.4% to 397.19
  • MSCI Asia Pacific up 0.3% to 184.58
  • MSCI Asia Pacific ex Japan down 0.4% to 605.58
  • Nikkei up 1.7% to 23,486.11
  • Topix up 1.8% to 1,870.44
  • Hang Seng Index down 0.8% to 32,642.09
  • Shanghai Composite down 1% to 3,446.98
  • Sensex down 0.09% to 35,932.52
  • Australia S&P/ASX 200 up 0.9% to 6,090.07
  • Kospi up 0.08% to 2,568.54
  • German 10Y yield rose 1.8 bps to 0.715%
  • Euro up 0.2% to $1.2443
  • Italian 10Y yield unchanged at 1.76%
  • Spanish 10Y yield fell 1.2 bps to 1.415%
  • Brent futures up 0.8% to $69.62/bbl
  • Gold spot down 0.3% to $1,340.94
  • U.S. Dollar Index down 0.2% to 89.00

Top Overnight News

  • U.K. house prices rose in January as a shortage of properties coming up for sale offset an underlying slowdown in the market; the year-on-year increase reached 3.2%, the fastest pace since March
  • The EU is threatening sanctions to stop U.K. undercutting the continent’s economy after Brexit, including “tax blacklists” and penalties against subsidized companies, the Financial Times reports, citing a leaked strategy paper
  • Asia’s rich savers are driving up prices of the region’s dollar-denominated bonds, making it harder to find value even as they insulate the market, according to Goldman Sachs Asset Management
  • Manufacturing in the euro area grew at one of the fastest paces on record in January, with high demand fueling inflationary pressures
  • PBOC is reasonably comfortable with yuan strengthening against USD but would be a problem if it spread to other currencies in trade weighted basket, Reuters reports, citing people familiar
  • European Jan. Manufacturing PMIs: Spain 55.2 vs 55.6 est; Italy 59.0 vs 56.6 est; France 58.4 vs 58.1 est; Germany 61.1 vs 61.2 est. Eurozone 59.6 vs 59.6 est; U.K. 55.3 vs 56.5 est.
  • Brexit: EU threatens sanctions to stop U.K. undercutting the economy after split; including “tax blacklists” and penalties for subsidies: FT
  • In Italy, SWG poll shows 37% are undecided before the election; would make this group the largest bloc from polling numbers
  • Chinese Jan. Caixin Manufacturing PMI 51.5 vs 51.5 est.

Asia equity markets were mostly higher as region digested a slew of earnings and after initial momentum from the US, where stock markets looked past the widely-anticipated hawkish language tweak by the FOMC and topped off the best monthly performance in the S&P 500 and DJIA since 2016. ASX 200 (+0.9%) and Nikkei 225 (+1.5%) traded higher with the rebound in crude fuelling outperformance in Australia’s energy sector, while Japan led the gains in the region amid a softer JPY and deluge of corporate earnings. Conversely, Shanghai Comp. (-1.0%) and Hang Seng (-0.3%) were less inspiring and traded choppy after a 6th consecutive open market operation skip by the PBoC and an inline Chinese Caixin Manufacturing PMI release, while a slump in Shenzhen stocks to 6-month lows also triggered further mainland pressure. Finally, 10yr JGBs were lower amid the positive risk tone in Japan, although prices were supported off lows after stronger demand in the 10yr JGB auction. Chinese Caixin Manufacturing PMI Final (Jan) 51.5 vs. Exp. 51.5 (Prev. 51.5). PBoC skipped open market operations again today for a daily net drain of CNY 80bln. PBoC set CNY mid-point at 6.3045 (Prev. 6.3339)

Top Asian News

  • The Breakneck Rise of China’s Colossus of Electric-Car Batteries
  • India Said to Propose Long-Term Capital Gains Tax on Equities
  • India to Curb Cryptocurrency Use While Embracing Blockchain
  • India Breaches Deficit Goals, Taxes Stock Investors to Woo Votes
  • Bond Rout in India Set to Deepen as Modi Widens Deficit Targets

European equities trade higher across the board (Eurostoxx 50 +0.6%) amid another positive close on Wall Street which saw the best monthly performance in the S&P 500 and DJIA since 2016; FTSE 100 (+0.2%) lags its peers with GBP/USD back above 1.4250. In terms of sector specifics, all sectors trade higher with the exception of health care names in the wake of Novo Nordisk (-4.5%) latest earnings update; outperformance seen in utilities, IT and financials as earnings dictate the state of play. Notable large cap earnings this morning include, BBVA (+1.1%), Roche (+0.3%), Unilever (flat), Vodafone (-0.8%), Daimler (-0.8%) and Shell (- 0.7%). In European Fixed Income, not much chance to counter-trend and little respect for or support evident at pre-FOMC session lows as bond bears pounce on upticks to push benchmark futures deeper into negative territory. Bunds have now slumped to 158.27 at worst (-55 ticks on the day), and Gilts hit 121.50 (-64 ticks) to record a new March contract base.

Top European News

  • U.K. Manufacturing Growth Unexpectedly Slows as New Orders Ebb
  • Fox Casts Doubt on the Brexit Transition as May Vows to Fight
  • Dutch Regulator Recommends Slashing Groningen Gas Output 44%
  • Hungary Rejects Macron ‘Arrogance’ as EU Reform-Fight Looms
  • Vodafone Forced Into Discounts Over Southern Europe Rivalry
  • Euro-Area Manufacturers Start Year With Near-Record Momentum

In FX, the DXY only derived modest and fleeting support from the FOMC’s more hawkish inflation outlook and upbeat growth assessment with the Index back on the 89.000 handle having topped out some way short of 89.500. In the event, rate (hike) expectations for March and 2018 overall are barely changed in the aftermath so the Dollar has resumed its broadly weaker trend with post-Fed gains only maintained against a few G10 currencies. Usd/Jpy remains firmer within a wide 109.00-110.00 band, as loose BoJ policy is not seen shifting anytime soon, eyeing support around 109.41 (200 HMA) and resistance in the 109.60-75 area before 109.88 (50% Fib) on the narrow. Aud/Usd has rejected the 0.8100 level again, and pulled back further towards the big figure below and almost retesting last week’s 0.8005 base just ahead of key support a few pips under 0.8000 – sharp drop in Aussie building permits weighing. Conversely, Cable continues to recover and consolidate above the 1.4250 level, but capped by a small UK manufacturing PMI miss and offers said to be sitting at/over 1.4280. Eur/Usd is also back in the ascendancy having reclaimed 1.2400+ status and basing ahead of 1.2366 chart support, the 200 HMA at 1.2375 and bids from 1.2370-80. Note, however, hefty option expiries between 1.2400-25 may yet exert some influence.

In commodities, WTI and Brent crude futures are seen higher alongside the softer USD with prices above USD 65/bbl and USD 69/bbl respectively; prices could also be being supported by comments from Shell who expect their 2018 CAPEX to be at the lower end of their guided range. Notable energy newsflow includes Goldman Sachs raising their Brent crude oil 3-month forecast to USD 75/bbl (Prev. USD 62/bbl) and 6-month forecast to USD 82.50/bbl as “rebalancing has likely been achieved”. In metals markets, spot gold trades lower amid the broader global risk sentiment and thus unable to benefit from the softer USD. Elsewhere, Chinese steel futures were seen higher overnight amid speculation over an extension to existing output curbs. Finally, Glencore, as part of their production update this morning, announced that copper output should rise to nearly 1.5mln/tonnes this year as production at their Katanga mine ramps up.

US Event Calendar

  • 7:30am: Challenger Job Cuts YoY, prior -3.6%
  • 8:30am: Nonfarm Productivity, est. 0.7%, prior 3.0%; Unit Labor Costs, est. 0.9%, prior -0.2%
  • 8:30am: Initial Jobless Claims, est. 235,000, prior 233,000; Continuing Claims, est. 1.93m, prior 1.94m
  • 9:45am: Markit US Manufacturing PMI, est. 55.5, prior 55.5
  • 10am: Construction Spending MoM, est. 0.4%, prior 0.8%
  • 10am: ISM Manufacturing, est. 58.6, prior 59.7
  • Wards Domestic Vehicle Sales, est. 13.5m, prior 13.7m
  • Wards Total Vehicle Sales, est. 17.2m, prior 17.8m

 

 

 

 

 

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Clark County Defies Order To Release Vegas Shooter Coroner’s Report

After months of radio silence, new information released earlier this week surrounding the investigation into Las Vegas Shooter Stephen Paddock’s motive appears to have revived suspicions that another person was involved in the shooting.

The newly unsealed documents – which were unsealed by court order after journalists at the Las Vegas Review-Journal and other media sued – revealed that the FBI is seeking a “person of interest” named Douglas Haig. Haig’s name had not previously been connected to the shooting. What’s more, according to what’s been widely cited as his LinkedIn page, Haig had “DOD Top Secret clearance” and worked for top weapons manufacturers and specialized in Military Ammunition, as we pointed out.

Haig’s connection to Paddock and the shooting is unclear, but in another confusing development, Clark County Nevada Coroner John Fudenberg is defying a court order to release the full autopsy report for Paddock – even though Paddock’s body was cremated in December.

According to the Daily Caller, District Court Judge Timothy Williams ordered the coroner Tuesday to immediately release the autopsy. Fudenberg is conferring with others in his office, and no date had been given for his compliance with the judge’s order, the corner’s office told The Daily Caller.

The office also told the Las Vegas Review-Journal that the report wouldn’t be released until it was “finalized.”

“The coroner’s office has fought to keep autopsy reports confidential,” according to the the Review-Journal.

It’s difficult to imagine what component of the autopsy could, at this point, be left unfinished; after all, Paddock’s body was destroyed weeks ago. And yet, the coroner has chosen to pay $32,000 in legal costs instead of turning over the final report.

“The shooter’s body was cremated Dec. 21. How can the autopsy report not be ‘finalized’ when the body was cremated more than five weeks ago?” Review-Journal Editor-in-Chief Keith Moyer publicly stated. “The law is squarely on the side of the public’s right to open government.”

An interim report released Jan. 8 gave only scant information about the autopsy and did not release either the autopsy or a toxicology report on Paddock.

“Preliminarily, the injuries noted were on the posterior of both calves and a gunshot wound to the upper palette inside the decedent’s mouth with obvious damage to the upper teeth,” the department stated.

“The cause of Paddock’s death was an internal gunshot wound and the manner of death was ruled a suicide,” the report concluded.

Paddock

While the details so far largely comport with the early press reports, some say the initial report was suspiciously lacking in detail.

“What’s glaring are the missing details on the autopsy,” said Wayne Black, a 40-year veteran law enforcement and private security expert, in an interview with TheDCNF.

“This is probably one of the most significant medical examiner’s investigations of the year,” he said.

It’s been four months since the shooting, and still much remains vague or unknown. Paddock’s motives remain a mystery. Unanswered questions remain about the official timeline of events. Photos published online in the immediate aftermath of the shooting purported to show a second shooter closer to ground level, but they were largely dismissed by law enforcement and the media.

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Customer Lawsuits Pummel Spanish Banks

Authored by Don Quijones via WolfStreet.com,

After it collapsed, Banco Popular was discovered to have 55,000 complaints against it.

 

Following a succession of consumer-friendly rulings, bank customers in Spain are increasingly taking their banks to court. And many of them are winning. Last year an unprecedented wave of litigation against banks forced the Ministry of Justice to set up dozens of courts specialized in mortgage matters to prevent the collapse of the rest of the national judicial system.

The Bank of Spain, according to its own figures, received 29,957 complaints from financial consumers between January and September 2017 — already double that of the previous year and by far the highest number of complaints registered since 2013, a record year when investors and customers were desperately trying to claw back the money they’d lost in the preferred shares that issuing banks had pushed on their own customers as savings products.

In 2017, eight out of 10 complaints related to one key product: mortgages, and in particular the so-called “floor clauses” contained within them.

These floor clauses set a minimum interest rate — typically of between 3% and 4.5% — for variable-rate mortgages, even if the Euribor dropped far below that figure. This, in and of itself, was not illegal. The problem is that most banks failed to properly inform their customers that the mortgage contract included such a clause. Those that did, often told their customers that the clause was an extreme precautionary measure and would almost certainly never be activated. After all, they argued, what are the chances of the Euribor ever dropping below 3.5% for any length of time?

At the time (early 2009), Europe’s benchmark rate was hovering around the 5% mark. Within a year it had crashed below 1% and has been languishing at or below zero ever since. As a result, most Spanish banks were able to enjoy all the benefits of virtually free money while avoiding one of the biggest drawbacks: having to offer customers dirt-cheap interest rates on their variable-rate mortgages.

But all that came to a crashing halt in May 2013 when Spain’s Supreme Court ruled that the floor clauses were abusive and that the banks must reimburse all the funds they’d overcharged their mortgage customers — but only from the date of the ruling! Then, on December 21, 2016, the European Court of Justice (ECJ) delivered a further hammer blow when it acknowledged the right of homeowners affected by “floor clauses” to be reimbursed money dating back to when the mortgage contract was first signed. Since the ECJ ruling, law firms are now so confident of winning floor-clause cases that they’re even offering no win, no-fee deals.

The total cost of the ECJ ruling for the 40 (out of 42) Spanish banks implicated in the floor clause scandal is estimated to be in the order of €6 billion. One of the banks most exposed to the financial fallout, Banco Popular, collapsed in June 2017, though to what extent the “floor clause” payouts played a role is still not clear. What is clear is that when Grupo Santander took over the toxic debt laden bank for the princely sum of €1, its accountants discovered that 55,000 customer complaints concerning floor clauses had been “put completely on hold,” in direct contravention of the ECB ruling.

Now, Spanish banks face the prospect of a fresh wave of customer complaints and lawsuits, over two unrelated issues, with potentially even bigger financial ramifications than the floor clauses:

Overdraft Fees. In the last six months of last year, at least thirty courts and provincial hearings ruled against a number of banksfor applying these fees (not to be confused with the interest that banks charge on overdrafts). The fees are an easy source of profits for banks but according to the judges behind the rulings, they are also abusive. Judges have also pointed out that a fee is normally charged for a service provided by the bank, but in this case no such service is provided, and any fee charged by a bank must be previously agreed upon with the customer.

Stamp Duty. This is where the financial pain could really be felt. The banks’ troubles date back in December 2015 when Spain’s Supreme Court, prompted by an earlier ECJ ruling, established that lenders ought to pay for all or at least part of the fees associated with taking out a home loan, which typically represent between 2.5% and 3% of the home loan. Once again, the law’s effects are retroactive and apply to anybody who is currently paying a mortgage or who paid it off after December 2011. But there’s still a huge amount of doubt over how the law should apply to Stamp Duty (or AJD tax) whose payment could also become the responsibility of the banks. If banks are made to reimburse customers the full amount paid for Stamp Duty, the total bill could run as high as €18.3 billion, three times the total cost of the floor clause ruling.

For the moment everything is in limbo. Since the 2015 Supreme Court ruling over mortgage set-up fees, various trial courts and appellate courts have handed down decisions both in favor and against borrowers. In the interim, at least six banks – Santander, BBVA, CaixaBank, Bankia, Sabadell and Ibercaja – have changed their clauses so that they now cover around 30% of these associated fees, in a bid to prevent further lawsuits. But it may not be enough.

The ultimate decision is scheduled to be made by the Supreme Court in the coming days. As happened with its initial floor clause ruling, the judges will probably try to minimize the financial pain for the banks but that could merely prompt consumer groups to appeal the decision at the ECJ.

If Spain’s Supreme Court does rule that the banks are indeed liable for Stamp Duty and, as such, must reimburse customers the full costs of the tax with retroactive effect, Spanish banks could end up facing an even larger — and more costly — avalanche of lawsuits than they did in 2017. For some banks, already under concerted pressure from weak credit demand, lingering bad loans and low interest rates, the balance sheet impact could be brutal.

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Two-Thirds Of UK Pension Funds Are In The Red – $300 Billion Shortfall Revealed

Sir Steve Webb, a former pensions minister under the recent coalition government, said Carillion would not be the last big company to fold leaving its pension scheme in jeopardy.

“The question isn’t if there will be another Carillion – it’s when,” said Webb, who is now director of policy at pensions group Royal London.

His ominous warning appears prophetic as, according to the Pension Protection Fund (PPF) watchdog, some 3,710 schemes are in deficit, putting a serious question mark over the retirement plans of millions of workers.

The PPF monitors the health of 5,588 pension pots, with some of the biggest names on the FTSE 100 running schemes with major shortfalls.

That means two out of three pension funds are in the red – to the tune of a combined £210 billion ($300 billion).

As Yahoo reports,  the PPF has been called into action on two high profile occasions of late – working with Toys R Us to secure a near £10m injection into its ailing fund to protect the company’s short-term future and also sorting through the debris of the Carillion collapse.

The giant contractor folded earlier this month with debts of above £1.3bn, including an estimated £800m hole in its pension fund.

The Carillion collapse affects about 27,500 members of its various pension schemes, the latest in a long line of funds to face an uncertain future. As Webb warns:

“With two-thirds of schemes in deficit it is inevitable there will be more insolvencies and more schemes ending up in the PPF.”

The PFF typically pays members 90% of what their nest eggs were worth in the event it has to intervene to safeguard a scheme.

A report from consultants PwC last October estimated the total deficit of all the defined benefit (DB) pension funds in the UK stood at £410bn.

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